patentology

28 June 2011

Over the past six months or so, FOXTEL Management Pty Ltd (‘FOXTEL’) has opposed the grant of no fewer than nine patent applications in the name of TiVo, Inc.

We suspect that this may turn out to be the beginning of a protracted dispute between the two companies. At stake is the very viability of TiVo’s technology in the Australian marketplace, while FOXTEL’s freedom to continue providing advanced digital home entertainment services is also on the line.

The fact is that TiVo has failed to make a big impact in the Australian market. At the same time, FOXTEL is providing digital cable television services that include ‘intelligent’ features almost identical with those of TiVo’s ‘smart digital video recorders’.

Even without looking at the details of TiVo’s patent applications, it seems inevitable that FOXTEL would infringe at least some of the patent claims should the applications proceed to grant.

DIGITAL VIDEO RECORDERS AND THE AUSTRALIAN MARKET

Keen observers will know that TiVo is no stranger to patent disputes, having spent many years battling EchoStar Corp all the way to an en banc hearing of the US Court of Appeals for the Federal Circuit, before finally settling their differences (see Tivo v. Echostar: En Banc Opinion Stands at Patently-O).

However, Tivo is a less influential player in Australia than in the US. For many years the only Australian TiVo boxes were US units, imported by enthusiasts and hacked to operate with local free-to-air channels using unofficial user-generated electronic program guides (EPGs) shared via the internet.

Indeed, so rigorously did the Australian free-to-air networks defend their rights in their program guides that it took the steel nerves of start-up independent EPG provider IceTV to face-off against the Nine Network in litigation that went all the way to the High Court to establish that an independently produced and maintained EPG does not infringe the networks’ copyrights in their programming schedules (IceTV Pty Limited v Nine Network Australia Pty Limited[2009] HCA 14).

Authorised (i.e. licensed) access to the Australian networks’ own EPGs by personal digital video recorders (PVRs) is provided subject to certain conditions, the most significant being that a licensed PVR must not implement a dedicated ‘commercial skipping’ function (e.g. a one-press 30-second jump-ahead).

TIVO AND FOXTEL

In 2008, TiVo officially entered the Australian market via a local licensee, Hybrid TV, in partnership with the Seven Network, which provided financial backing and significant promotional clout. However, gaining a substantial market share has proven challenging, due to competition on at least two fronts.

The first problem for TiVo, in respect of free-to-air TV, has been IceTV. A 12-month subscription to the IceTV EPG, which is accessed via the Internet, costs under A$100.00. The company provides software and support for a range of popular PVRs, including Beyondwiz and Topfield units, as well as Windows PC and Mac-based solutions. Being outside the networks’ licensing regime, the systems supported by IceTV and not subject to restrictions on functions such as commercial skipping. However, these systems do not support some of the more ‘intelligent’ functions of the TiVo PVRs, such as automatic suggestions and recording (although IceTV’s online services, and other third-party add-on software, go some way to bridging the gap, particularly for more technically-inclined users).

Enter, then, TiVo’s second major challenger in the Australian market – FOXTEL iQ.

FOXTEL is Australia’s leading provider of digital cable TV (CATV) services, backed by Twentieth Century Fox and Telstra Corporation. The feature list of FOXTEL iQ reads just like the TiVo alternative – dual tuners, remote recording, automatic recording, ‘FOXTEL On Demand’ and ‘iSuggest’.

The major downside to FOXTEL iQ is that it requires a CATV subscription, at a cost of a few tens of dollars per month (the exact amount depending upon the package selected). And, like TiVo and other licensed PVRs, it lacks functions to make skipping of commercials easy. But it does offer access to all of the free-to-air channels, in addition to the paid subscription services, and so with Australian households increasingly choosing to subscribe to pay TV services, FOXTEL cuts a significant slice out of TiVo’s potential market on one flank, while competing PVRs in combination with IceTV’s EPG services are squeezing them on the free-to-air side of the business.

WHAT IS AT STAKE, AND WHERE FROM HERE?

FOXTEL is a major player in the Australian digital entertainment market, with enormous financial, political and media clout. It is offering ‘TiVo-like’ services via its iQ units, and undoubtedly wishes and intends to keep doing so.

TiVo, on the other hand, has failed to establish a significant presence in the Australian market and, frankly, has probably missed the boat. It may therefore see FOXTEL as a potential source of licensing revenue from its Australian patents – should they ultimately proceed to grant.

It seems improbable that FOXTEL could successfully invalidate every claim of every TiVo patent through opposition. In addition, there are some TiVo patents already granted (although we are unaware of any disputes involving these as yet), and numerous other applications at various stages of prosecution, including some that have been accepted, but are yet to be opposed (stay tuned).

The oppositions are therefore almost certainly strategic – the first step in a campaign intended perhaps to tie the applications up in opposition proceedings (and possible appeals) for many years to come, and/or to force TiVo to the negotiating table with FOXTEL in a position to press for a favourable deal.

We will continue to keep an eye on this dispute, and provide updates on developments.

THE OPPOSED APPLICATIONS

The following table identifies the nine TiVo applications recently opposed by FOXTEL. The application numbers link to the corresponding IP Australia record.